Building resilient businesses in Africa

Building resilient businesses in Africa

Above we discuss some of the major events that have shaken confidence. We also cover the very positive underlying trends that present so much opportunity, particularly as many other global economies continuing to experience spasms. As we highlighted in our RiskMap 2015, there have been only slight improvements in governance in Africa, despite strong economic growth. Whether acknowledging pressure from militant groups, the Ebola outbreak, or the infrastructure deficit, it would be fair for even the optimist to question whether states are sufficiently resilient to provide truly world-class markets for growth.

Strong fundamentals are undermined, to an extent, as many of the continent’s key markets find continual challenges in providing solid platforms for growth. Companies can close this gap ‒ despite the challenges; organisations can embed resilience in their operations, making up for the shortfall. Or, to put it another way, when national resilience is unclear and external factors uncertain, companies need to embed focus on organisational resilience.

Defined by the Resilience Action Initiative, a group of international companies, resilience is “the capacity of business, economic and social structures to survive, adapt and grow in the face of change and uncertainty related to disturbances, whether they are caused by resource stresses, societal stresses and/or acute events”. To be resilient, companies need to not only understand what could undermine their objectives, but also remain nimble in tracking and responding to the factors that could affect them. In many African markets where opportunity abounds, but business, politics and the state overlap and identity can often trump policy, this is essential for success.

The types of issues operators may consider include:

If critical processes are moved to the local market, and adverse events occur, can operations be sustained?

In the event of instability, can the organisation protect itself and its people? Can operations continue?

When the level of stability in a country changes, is the organisation nimble enough to exploit opportunities that result?

If a key node in a supply chain is disrupted, is there an alternative? And if a competitor fails to meet that same challenge, can the organisation make gains?

How and why the region remains somewhat crisis prone is described above – African countries’ resilience is not founded on the traditional processes and mechanisms that generally make more developed countries resilient and quick to respond. This means that, despite some recent improvements, there can be yawning gaps that companies need to make up for. But despite this, given the enormous opportunity, companies are powering ahead. With larger investments the stakes are higher, and they can’t rely on doing “business as usual”. A systematic approach to managing a broad swathe of risks is needed.

In more practical terms, it is not enough to consider adverse events, nor is it sufficient to simply review the issues at a project’s inception, when key investment decisions are made, or when new markets are entered. An ongoing process will yield the best results. Shell’s global strategic plan has, since the 1970s, benefitted from horizon scanningto consider trends but also, in part, to identify potential shocks. Using this and other techniques, companies can prepare for adverse events and new opportunities. Resilient businesses are better able to address challenges than the country they are operating in.

To do this, and be capable of seizing opportunity in Africa’s thriving, dynamic economies, companies must adopt an approach that incorporates resilience into broader management systems, rather than tackling the issue in a manner that is divorced from day-to-day business. Increasing external scrutiny can prompt companies focus on compliance; this results in an approach that not only leaves them exposed to downside risk, but also constrained in seeking opportunity.

When an approach is effective, naturally there are tools to make the harmful events less likely to affect the business, and means to ensure opportunities are identified and exploited. But, critically, every decision is better informed by a fuller appreciation of internal and external factors that could affect success. Factors like market perceptions, requirements to localise and institutional shortcomings can challenge efforts to achieve objectives, and to promote genuine resilience – but done right, a successful programme will account for the unique challenges and opportunities the continent presents. It will inform the incremental changes required for gradual shifts and more-dramatic crisis events, and assure stakeholders that the organisation remains aligned to its objectives.

Even if an organisation has comprehensive means to identify and reduce the likelihood of adverse events, resilience can only really be assured by having an effective means to respond. This is particularly true when operating in jurisdictions where state capacity is limited; on the one hand this necessitates organisational self-sufficiency, but it also presents opportunity for the intrepid. Although plans are essential, preparing them cannot be treated like an academic exercise; developing people and their capabilities is crucial. Many companies are well versed in planning for acute events prompted by issues in the internal environment, but far fewer have planned for, or have tested, capabilities to respond to issues that arise from the external environment.

Many organisations have been successful in some of the continent’s most challenging jurisdictions for years. With many countries benefiting from enviable growth figures, there is now more of a need to than ever to embed resilience.

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